iPhone 3G saves Apple over $50 per unit

Even with the newer technology inside iPhone 3G, Apple has managed to trim the price of its handsets by over $50 and is making even more profit on each sale, according to a new cost breakdown by iSuppli.

The supply analysis group estimates that the raw cost of parts and assembly for a stock 8GB iPhone now costs Apple $173, or $53 less than the $226 it first cost Apple for the earlier cellphone.

Much of the breakthrough comes through leaving many existing components intact. While the Infineon 3G chipset and the Broadcom Global Locate GPS unit are new, the Samsung processor, flash memory, and numerous other parts are the same as for the 2007-era iPhone, more than offsetting the price increase that stems from the addition of 3G and GPS.

"They [at Apple] have done a good job in using what worked well with the first one and making improvements where it mattered," says iSuppli analyst Jagdish Rebello.

Although some fees can't be escaped, including $45 in royalties to Qualcomm and others for a 3G license, the savings are said to give Apple roughly $281 in profit with each phone's estimated full, pre-subsidy $499 price — or a more than 56 percent profit margin.

This doesn't, however, include shipping, sales, and the cost of bundling pack-in devices, according to the study. Apple's actual profit from each device is anticipated to be less, though the 16GB model is believed to be more profitable as the extra memory adds just $23 to the cost despite the $100 boost to the retail price.

Apple's cost reductions should also get steeper as time goes on, iSuppli adds. Apple's price to build an iPhone could drop to $148 by 2009, extending the electronics maker's margins even further ahead of the next major iPhone update.

Although some fees can't be escaped, including $45 in royalties to Qualcomm and others for a 3G license, the savings are said to give Apple roughly $281 in profit with each phone's estimated full, pre-subsidy $499 price -- or a more than 56 percent profit margin.

$4,245,000,000 (minus shipping, sales, and the cost of bundling pack-in devices) profit for the iPhone in 2009?
Not too shabby for a company that has been "struggling/bought out by MS/went bankrupt" for the last 20 years...

'Course, their estimates need to be taken with a grain of salt, as they've undoubtedly been done WITHOUT an actual iPhone in their possession to tear down, nor do I suspect that they have access to the numbers from Apple's supplier's contracts.

'Course, their estimates need to be taken with a grain of salt, as they've undoubtedly been done WITHOUT an actual iPhone in their possession to tear down, nor do I suspect that they have access to the numbers from Apple's supplier's contracts.

In fact, it probably isn't so much as estimate as it is a WAG...

That's not going to stop them from putting out estimates that have three significant figures in the number. Once they get the acual device, they'll pretend that they can make an estimate that's worth going to four significant figures.

I don't understand this business about assuming it has a $300. I don't understand why AT&T would take that on knowing that there's likely going to be hacks, and subsequently a lot of people that's going to buy the device and cancel the contract even if it costs them $175 - $200 to do so, leaving AT&T in the hole for $100 for each unit that leaves their network early. I don't think all the reasons to hack them have been fully addressed, and there are people that are willing to hack it just for the notoriety.

Partly due to the cheap plastic case back they will be using??? What happened to everything going to glass and aluminum? The only thing I've heard is acceptable reception can only be achieved with the plastic back but is that really true?